US Supreme Court to hear Facebook bid to escape securities fraud suit

The U.S. Supreme Court will review Facebook parent Meta’s appeal to dismiss a securities fraud lawsuit filed by shareholders over the company’s handling of user data.

The 2018 suit, led by Amalgamated Bank, claims Facebook misled investors by failing to disclose a 2015 data breach involving Cambridge Analytica, which used improperly obtained user data during Donald Trump’s 2016 presidential campaign. Facebook’s stock plummeted after news of the breach surfaced in 2018, prompting investors to seek damages.

The case hinges on whether Facebook's omission of the breach in its risk disclosures was deceptive under the Securities Exchange Act. Facebook argues that risk disclosures should be seen as forward-looking and claims it wasn’t legally obligated to report past breaches. While a federal judge initially dismissed the suit, the 9th U.S. Circuit Court of Appeals revived it, contending that Facebook portrayed known risks as hypothetical.

This case, along with another involving Nvidia, could shape the standards for securities fraud lawsuits, potentially making it harder for shareholders to hold corporations accountable. The Supreme Court's decision is expected by June, and it may further limit private claims against companies in cases of alleged securities fraud.